[...]... © 2003 by The McGraw-Hill Companies, Inc Click here for Terms of Use 10 THE NEW REALITY OF WALL STREET The Street is like lodge operator who avoids frightening customers by talking of bear risk The Street has euphemisms for falling markets: They begin as “pauses,” then become “pullbacks,” then “corrections.” The Street forbears saying “bear.” When Nasdaq was plunging in April 2000, the Street was... recalls the prescient observations of John Kenneth Galbraith, in The Atlantic Monthly of January 1987: 18 THE NEW REALITY OF WALL STREET History may not repeat itself, but some of its lessons are inescapable One is that in the world of high and confident finance little is ever really new The controlling fact is not the tendency to brilliant invention; the controlling fact is the shortness of public... had given to the less fortunate were understandably upset with the mystics who’d misled them They tended to express their resentment in strong terms It’s different this time—in two ways First, although this time millions of people also divested themselves of all or a substantial portion of their possessions, they didn’t give their wealth to the poor They gave it to a new class of new rich The beneficiaries,... chancellor of the exchequer (finance minister) and some of the company’s board of directors were sent to the Tower of London for their parts in what was declared to be a scheme of fraud It was convenient for the bruised egos of those who had lost heavily to define the whole game as fraud But it is doubtful that fraud was the key to the South Sea fiasco The real cause was the build-up of a critical mass of. .. that the inflation phobia of the 1970s had been vanquished That was the sea change in belief that was needed for the unfolding of the 18-year disinflationary bull market in equities and the 20-year disinflationary bull market in bonds When Nasdaq lost more than three-quarters of its value, it was convincing evidence that the New Era euphoria of the 1990s had been crushed, tak- 22 THE NEW REALITY OF WALL. .. thing—and there is a good deal in that—half of woodcraft, as of any other art, is in knowing what to avoid —HORACE KEPHART S O, YOU LOST BIG ON TECHNOLOGY STOCKS, and the same Wall Street people who told you to buy them and never told you to sell them now tell you they’re about to come back strong, “when the economy comes back.” How 20th century of them The 1990s aren’t coming back Neither is Nasdaq The. .. companies they managed whose period of earnings gains was about to turn into a period of earnings collapse 1 Copyright © 2003 by The McGraw-Hill Companies, Inc Click here for Terms of Use 2 THE NEW REALITY OF WALL STREET Second, most of today’s chiliasts have not been subject to serious abuse—physically, financially, or legally Most retain their jobs, which means they are receiving a new round of stock... resemblance to the world of the 1990s It’s rocky out there, not verdant, but that means reduced cover for bears and other predators There are opportunities for prudent foragers, but rewards won’t come easily Wall Street and Silicon Valley got together in an undeclared partnership to wire the world, enrich themselves, and convince a whole new class of investors into trusting the partners with much of their life... cause of what proved to be the worst recession since the Depression; and the Japanese Triple Waterfalls of 1989 to the present Each of these Big Mama attacks produced financial and economic catastrophe Mama Bears are the ursine equivalent of Dresden-style bombing They kill the guilty and the innocent alike, and continue to ravage until the core beliefs that allowed the Triple Waterfall to move beyond the. .. Crash of 1987”) The market opened under the weight of an unprecedented volume of sell orders driven from the overnight collapse in the S&P 500 Futures and Options contracts traded in Chicago and Europe The so-called cash market the New York Stock Exchange—could not handle such a torrent This was the first time that the market most investors thought of as the real stock market” was overwhelmed by the . class="bi x0 y0 w1 h0" alt="" THE NEW REALITY OF WALL STREET This page intentionally left blank. THE NEW REALITY OF WALL STREET An Investor’s Survival. of people also divested themselves of all or a substantial portion of their possessions, they didn’t give their wealth to the poor. They gave it to a new